What does an effective foreign exchange strategy look like?

In this Q&A, private client FX dealer David Bimpson and private banker James Thomson discuss how they help clients like you to manage their exposure.

1. What is the typical income profile that might require foreign exchange support?

James: “Many of our clients have complex or irregular income structures that include discretionary or deferred income such as bonuses or carry. Some of this income may be received in a foreign currency. This is especially true if they work for US law firms, funds or investment banks, and are remunerated in dollars.

Entrepreneurs, on the other hand, may draw dividends from a business to meet their expenses, but may receive foreign currency through overseas trading or a liquidity event, such as the sale of an asset.”

2. What financial challenges can these income profiles face?

David: “When our clients need to convert these funds into sterling, they could be exposed to fluctuations in the exchange rate, which might make their income or level of return unpredictable. We design ongoing FX strategies that will help meet financial commitments in the UK and abroad.

We’re also asked to manage event-driven foreign exchange exposure such as the purchase or sale of overseas property.”

3. How can Investec help with FX needs?

David: “We monitor the FX markets so that we can capture sudden movements in the rate. In the longer term, we may look at using FX Forward contracts to hedge ongoing exposure and secure exchange rates for up to two years in advance, to give predictability and capture potentially favourable rates.”

James: “We can also support a multi-currency income in other ways. Our Currency Access Accounts hold up to 15 currencies in interest-bearing accounts and it’s easy to view balances online. It is also possible to make overseas transactions of up to £100,000 online.

Finally, when providing a loan or mortgage, it is often possible for us to include foreign currency earnings as part of our affordability calculations.”

4. How do you help spot opportunities and mitigate risk?

David: “To cater to different risk appetites and financial goals, we help monitor global markets and track economic trends over time. Market volatility can have a big impact on exchange rates, so it’s important for us to be proactive and efficient, while building long-term relationships.”

Important Information: 

You can only book an FX Forward which is for an underlying personal or commercial spending purpose. You cannot book an FX Forward for investment or speculative purposes, for example in order to achieve a gain based on movements in exchange rates. Also, you cannot book an FX Forward on behalf of any other person. Additional terms and eligibility criteria apply for FX Forwards.

Investec residential mortgages are only available for residential properties in England or Wales and are primarily available to UK residents and subject to eligibility. Your home may be repossessed if you do not keep up repayments on your mortgage.